M Mohan
Private Equity at IncVangal, Former Microsoft Ventures Director
Microsoft's Azure rides on OpenAI's momentum, and OpenAI's latest revenue undercuts the bear case. OpenAI CFO Sarah Friar disclosed at an internal all-hands that July ARR alone exceeded all of Q2, driven by GPT-5.6, refuting the idea that model improvement outpaces monetization. Azure is growing 43% with a 45% guide, and as OpenAI goes, so goes Azure. x.comÂ
Microsoft is entering the IBM phase of the AI shift, with Anthropic and OpenAI playing Microsoft's PC-era role and capturing the value. Like IBM, it may not die but could become irrelevant and no longer outperform. Satya Nadella calling a few-model AI future "not stable" reads as admitting Microsoft lacks a competitive model. As platforms shift from apps to agents, value accrues to the model, not the cloud provider. Despite big AI investments it has little IP, and its capex looks ROI-neutral. x.com x.com x.com x.com x.com x.com x.com x.com x.com x.com x.com x.com x.comÂ
Microsoft's AI spending is producing faster growth with better economics: Azure accelerated to 48% on a $100B+ base while capex was $39.4B, below expectations. Management then guided Azure to 49-50% and said demand still exceeds supply, ending the debate over whether AI investment is paying off. Overweight, $625 target. x.com x.com x.comÂ
Microsoft's hold on enterprise software and the cloud running AI makes it one of tech's best positions to own. Fiscal Q1 revenue rose 19% on Azure and the AI stack, while operating income rose 21% and net income 32%. Grade: A. x.comÂ
Microsoft's Azure has lost its OpenAI-model access edge because those models are also on AWS and are coming to Google Cloud. Azure now has to win on price and service rather than access. x.comÂ
Microsoft's faster Azure growth on less capital spending than feared is the mix investors wanted from Big Tech. Azure brought in $33.2 billion last quarter, up 48%, its third consecutive quarter of accelerating growth; capex was $45.2 billion versus $50.8 billion expected. x.comÂ
Microsoft's salesforce and governed platform unlock AI spending at conservative firms. Faster enterprise than consumer AI adoption makes it effectively the only pure play. M365 Commercial may top 20% growth next quarter, sooner than expected on tonight's guide; GitHub resegmentation helps, but it should do so this year anyway. Azure and M365, two-thirds of revenue, should grow above 50% and 20% and may accelerate. $24-25 CY27 EPS remains achievable, implying under 22x forward earnings. x.com … Show more
Microsoft's revenue dependence on OpenAI is a negative, though not as bad as expected. Of Azure's more than $100B of fiscal 2026 revenue, $24B came from OpenAI. Replying to @sv_techie, who heard 70% of Microsoft's AI revenue comes from OpenAI: it is unclear how AI revenue is quantified, but the Azure figure is solid. x.com x.comÂ
Accelerating Azure and AWS growth shows hyperscaler buildout and monetization have not slowed. Microsoft reported 48% Azure growth and guided to 49-50%; Amazon expects AWS growth above 40% in 2027 and 2028, positive for the infrastructure trade. Amazon's growth is more capital intensive, with deeply negative free cash flow projected, though AWS margins remain healthy. x.com x.com x.comÂ
Microsoft is showing real ROI on AI spending, with Azure growth accelerating to 43% and the business now over $100B a year. RPO reached $678B, up 84%, with about 30% converting to revenue within 12 months, and Microsoft delivered without the aggressive capex step-up the market feared. x.com x.comÂ
Microsoft's insatiable-demand story now hinges on OpenAI growing revenue into commitments it may not be able to fund. OpenAI's compute commitments have risen to $750B through 2030 from $600B, including $250B more for Azure, which its own CFO has privately doubted it can fund. That gap is now the real risk. x.comÂ
Azure's accelerating growth and better returns per capex dollar leave further upside on the table for Microsoft, the favored hyperscaler. Azure grew 48% versus 44-45% guidance, its fifth straight beat. The stock is holding eight-week EMA support, with the blue candle still intact. x.comÂ
